Accaboeka Accounting Services
Does your company need to register for VAT?
Companies in South Africa need to register for VAT when its turnover (not profit!) exceeds or is expected to exceed R300,000 in a twelve month period.
Being registered for VAT means you add an extra 14% to your invoices, which has to be paid over to SARS. You can also claim the VAT back against purchases you make that incur VAT. You may only claim the VAT if you bought from a registered VAT vendor, and not for all expenses (for example not on payroll or entertainment expenses).
You can choose to register for VAT if your turnover is between R20,000 and R300,000 in a twelve month period.
SARS will not register you for VAT if your turnover is under R20,000 in a twelve month period.
As a small company with turnover not exceeding R30 mil, your VAT returns need to be filed bi-monthly. Which months it have to be filed in, will be determined by SARS on application. For example, if your VAT period is March to April, your VAT return needs to be file before 25 May.
I can help you register for VAT, show you how to keep track with your chosen accounting package, or keep track of VAT for you by doing monthly or bi-monthly transaction capturing. I can also file your VAT for you and make the payments electronically to SARS from your bank account, so there will be nothing for you to worry about.
Steps to follow to register for VAT (I can do this for you with the necessary information)
Apply for compulsory as well as voluntary registration on form VAT 101 (Application for registration). The form must be submitted to your local SARS office not later than 21 days from the date of liability.
Documents to be submitted with the application are:
- Documents confirming identity
- A certified copy of the vendor’s identity document (ID) and the spouse’s ID if married in community of property
- In case of juristic persons such as companies, close corporations and trusts, the representative vendor’s ID
- In the case of a foreign enterprise, the personal particulars of the appointed representative in South Africa
- A copy of the relevant registration certificate from the Registrar of Companies/ Close Corporations (e.g. CK 1 , CK 2, CM 1, CM 29)
- A certified copy of the founding document if applicable (e.g. trust deed, partnership agreement), or letterhead in the case of a local or public authority. In the case of a verbal partnership, you must complete form VAT 128. Articles of Association for a company are no longer required.
- Other general documents (all applications)
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- The latest bank statement, cancelled cheque or letter from the bank confirming your South African bank details. If the bank account is not in the vendor’s name, complete form VAT 119i
- A letter of appointment as external bookkeeper, accountant or auditor if Part 7 of the VAT 101 has been completed
- A recent copy of a municipal account or lease as proof of address
- A business plan, feasibility study, signed contracts, franchise agreement or projections or other proof indicating that the value of taxable supplies is likely to be more than R300 000. This is not required if you have already exceeded R300 000. In the case of voluntary registration proof must be submitted of the actual turnover having exceeded R20 000
- Trading licence if applicable for that business, e.g. liquor or fishing licence.
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Once an application for registration has been made, the Receiver of Revenue will advise you of your registration number. You will also receive a VAT registration certificate (VAT 103).
You will also be advised if your registration has been refused.
What are the requirements for a valid tax invoice?
Value-added tax (VAT) in South Africa is an invoice-type of tax on the value added to goods and services consumed in South Africa and is levied at the standard rate of 14% (inclusive basis), but certain goods and services are subject to a zero-rate or are exempt from VAT. VAT is also levied on the importation of goods as well as on the supply of imported services into South Africa by any person.
The tax is calculated by allowing the vendor to deduct the VAT incurred on most business expenses (input tax) from the tax collected (output tax). The balance is paid to SARS (or refunded as the case may be).
Input tax may, however, only be claimed where proper tax invoices or bills of entry are held by the vendor making the claim. Tax invoices are, therefore, a very important part of how the whole VAT system operates, as it is used to create a paper trail for audit purposes.
There is a difference between an invoice and a valid tax invoice. An
invoice is a document notifying the purchaser of an bligation to make payment in respect of a transaction (not necessarily a taxable supply). The issuing of an invoice is one of the events which may trigger the time of supply for a transaction, which, if it is a taxable supply, will normally mean that there would be an obligation to declare output tax.Conversely, the fact that you may have an invoice from the supplier does not mean that you will be entitled to claim input tax thereon.
On the other hand, a
tax invoice is a document which enable the vendor to claim input tax. It will therefore always relate to a taxable supply (whether wholly or partially). A tax invoice must contain certain details about the taxable supply as well as the parties to the transaction.In practice, some vendors combine the function of the two documents to avoid administrative duplications. However, vendors who prefer this method should ensure that their invoices comply with the requirements of a tax invoice, otherwise their customers will not be allowed to claim the VAT charged as input tax. If the total purchase price does not exceed R50, no tax invoice is required.
In order for a tax invoice to be valid in terms of the VAT Act, it must have certain details reflected on the document as follows:-
Full Tax Invoice (Consideration of R3 000 or more)
- The words “TAX INVOICE” in a prominent place
Abridged Tax Invoice (Consideration less than R3 000)
- The words “TAX INVOICE” in a prominent place
The consideration and the VAT charged must be reflected on the tax invoice in one of the following approved formats:-
Method 1 : All individual amounts reflected
Price (excl. VAT) R500
VAT @ 14% R70
Total including VAT R570
Method 2 : Total consideration and the rate of VAT charged
The total consideration R570
VAT included @ 14%
Method 3 : Total consideration and the VAT charged
The total consideration R570
VAT included R70
Click here for examples of valid tax invoices
Click here for special cases relating to tax invoices, for example:
- purchases of second hand goods,
- reposessed goods,
- electronic invoices,
- lost or misplaced invoices, etc.
Is it legal to quote a price excluding VAT?
According to part 10 of the VAT Act, any price charged by any vendor in respect of any taxable supply of goods or services shall be deemed to include any tax payable in respect of such supply; whether or not the vendor has included tax in such price.
Any price advertised or quoted by any vendor in respect of any taxable supply of goods or services shall include tax and the vendor shall in his advertisement or quotation' state that the price includes tax.
Where the price inclusive of tax and the price excluding tax for a supply are advertised or quoted, both prices shall be advertised or quoted with equal prominence and impact.
Where only one price is quoted, customers therefore have a right to demand that the price included VAT, even if the supplier is ademand that it excluded VAT.
If you are unsure about whether you need a tax invoice, whether it is legal, or what to do if the one you received is not, email me, and I will try and answer all your queries!
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